Opinion
Argued May 27th, 1942.
Decided September 18th, 1942.
1. Whether or not complainant was an accommodation maker or endorser to the knowledge of the bank in this case, she was primarily liable to the bank by virtue of Comp. Stat. p. 3738 § 29 (now R.S. 7:2-29) in force when she became maker and endorser on all the notes in the series on which her name appeared.
2. If it were necessary to show consideration to support such primary liability, sufficient could be found in any loss or detriment suffered by the bank in forebearing to exercise its absolute right to demand payment from her when it could and, upon her failure to pay, to recover judgment against her. It is not necessary that any benefit should have accrued to complainant.
3. Complainant assigned insurance policies covering the life of her husband and under which she was beneficiary, as well as their proceeds, to the bank unconditionally, as security for all obligations on which her husband was then or might thereafter become liable to the bank. The right thus given the bank to apply the proceeds as it saw fit in discharge of any of her husband's obligations, passed to defendant as its assignee. It should not be limited by complainant's plea that since she was, as between her husband herself, a surety on one of his obligations, the proceeds of the policies should first have been applied in discharge of that particular debt.
4. Complainant having presented the contention that she executed assignments of the policies in question to the bank on an express oral agreement made on behalf of the bank that the proceeds would first be applied to any obligation of her husband to the bank on which she was liable, and the jury having thereafter rendered a verdict against complainant, the question of the existence of such an agreement is res adjudicata and cannot be considered in this action.
On appeal from a decree of the Court of Chancery advised by Vice-Chancellor Fielder, who filed the following opinion:
"Complainant seeks to restrain defendant from enforcing a judgment for $3,792.46 it recovered against her May 7th, 1941, in our Supreme Court, in a suit on a promissory note dated July 24th, 1934, for $2,650 and interest, made by her husband, George J. Wolf (who subsequently died), and herself to the order of `ourselves,' endorsed by the makers and delivered to the Trust Company of New Jersey (hereinafter called Trust Co.). She also seeks a decree directing defendant to account for money received by it as the proceeds of three policies of insurance on the life of her husband, which policies had been assigned to the Trust Co. by complainant and her husband, and to apply said proceeds in payment of the note on which the judgment was recovered and to satisfy the judgment of record. The note and other note obligations on which her husband was liable and the policies of insurance were assigned by the Trust Co. to defendant in or about April, 1939.
"Complainant's contentions are that she was an accommodation maker and endorser on the note sued on and as such she should be regarded as a surety thereon and be entitled to such defenses and relief as a surety should have in equity; that as a surety she was entitled to have the proceeds of the assigned policies applied first to payment of the note in suit, because she was the beneficiary named in the policies; that her assignments of the policies were made pursuant to agreement with an official of the Trust Co. that the proceeds of the policies would be first applied to satisfy any obligation of her husband on which she was liable, before applying them to such of those obligations on which she was not liable, and that contrary to such agreement the defendant applied the entire policy proceeds on account of an obligation of her husband for which she was in no way legally responsible.
"In the action at law against complainant she could not show that her husband was primarily liable on the note sued on and that she, as an accommodation maker and endorser, was merely a surety for its payment ( Anthony v. Fritts, 45 N.J. Law 1; Shute v. Taylor, 61 N.J. Law 256). Such a defense would in some cases be available in equity as, for instance, if the holder of the note knowing the complainant to be an accommodation maker and endorser, had without her assent extended time for payment of the note to her husband as the principal debtor, or had compromised the claim with her husband ( Westervelt v. Frech, 33 N.J. Eq. 451; Grier v. Flitcraft, 57 N.J. Eq. 556; Slatoff v. Theurich, 123 N.J. Eq. 593 ). But complainant's claim to relief is not based on such grounds. Her contention is that because she was an accommodation maker and endorser on the note sued on, to the knowledge of the Trust Co. and also the beneficiary named in the policies at the time they were assigned to the Trust Co., the defendant was bound in equity to apply the policy proceeds to the discharge of her liability before applying them to other of her husband's debts.
"The note on which defendant recovered judgment was the last of a series, the first of which was for $3,500 dated April 21st, 1930, made by George J. Wolf and endorsed by him and Atwood C. Wolf over to the Trust Co. When the note fell due July 21st, 1930, it was renewed on payment of $200 and a new note for $3,300 was given by George J. Wolf and complainant as makers, and endorsed by them and Atwood C. Wolf. That note was renewed at three-month intervals by payments on account and the giving of new notes with the same makers and the same three endorsers down to July 21st, 1931, at which time a renewal note for $2,750 made by George J. Wolf and complainant and endorsed by them (without the endorsement of Atwood C. Wolf) was given the Trust Co. and thereafter that note was renewed from time to time by payments on account and the giving of new notes with the last named makers and endorsers, until July 21st, 1932, on which date a new note was given for $2,650 by George J. Wolf and complainant as makers and endorsers, and that note was thereafter renewed for the same amount every three months by new notes with the same makers and endorsers, until the final note of July 24th, 1934. When the Trust Co. assigned that note (with others) to defendant, it was the only one on which complainant was obligated.
"Complainant says she was an accommodation maker and endorser on the note of July 21st, 1930, and on all the notes subsequently given in renewal thereof and that the Trust Co. had knowledge of that fact, but the only proof offered to substantiate her claim that she was an accommodation maker and endorser is her own testimony, and the only proof to establish the Trust Co.'s knowledge that she was, consists wholly in the fact that the proceeds of the first note of April 21st, 1930, to which she was not a party, were credited to the account of George J. Wolf, and her testimony that she never received any of the proceeds of the renewal notes signed by her.
"Whether or not complainant was an accommodation maker or endorser to the knowledge of the Trust Co., she was by virtue of Comp. Stat. p. 3738 § 29 (now R.S. 7:2-29) in force when she became maker and endorser on all the notes in the series on which her name appeared, primarily liable to the Trust Co. If it were necessary to show consideration to support such primary liability, sufficient could be found in any loss or detriment suffered by the Trust Co. when it accepted her notes. It is not necessary that any benefit should have accrued to complainant. ( Scherman v. Stern, 93 N.J. Eq. 626). When the first note on which her name appeared fell due, the Trust Co. had the absolute right to demand payment from her and upon her failure to pay, to recover a judgment against her — so, too, as each of her renewal notes fell due — but the Trust Co. forebore its immediate right and accepted her renewal notes, thus extending her time to pay. Therefore with each of her renewal notes she ceased to be an accommodation maker and endorser so far as the Trust Co. was concerned and she was liable to the Trust Co. as a holder for value. ( Schmid v. Haines, 115 N.J. Law 271.) Loss or detriment was also suffered by the Trust Co. when on July 21st, 1931, the note in the series on which Atwood C. Wolf was an endorser fell due, the Trust Co. could have demanded payment from him as well as from complainant, but it forebore to do so in consideration of a new note made by complainant and her husband without the endorsement of Atwood C. Wolf. I can find nothing in the note transactions which required the Trust Co. to treat complainant as a surety who had joined in making and endorsing notes to it as an accommodation for her husband.
"Complainant's husband had three policies of insurance on his life wherein his estate was the beneficiary originally named, but a few months prior to assignments of the policies he had made change of beneficiary to complainant. By assignments dated January 9th, 1931, executed by Wolf and complainant, they assigned the policies unconditionally to the Trust Co., together with all sums of money, benefits and advantages to be had or derived therefrom, both accrued and to accrue thereunder and the same day Wolf executed a pledge of the policies (with other assets) for the stated consideration of financial accommodation given or to be given him, as collateral security for all debts or liabilities then existing or thereafter contracted, directly or indirectly by Wolf. The pledge agreement provides that in case of sale of the pledged securities for more than the amount due the Trust Co., the surplus should be paid to Wolf. When complainant executed the assignments of the policies she knew that the policies were to be held by the Trust Co. as security for all obligations on which her husband was then or might subsequently become liable to the Trust Co. At that time Wolf was indebted to the Trust Co. directly and indirectly for at least $15,000 and he had applied to the Trust Co. for a further loan of $10,000, which was granted him three days after the assignment of the policies and apparently on the faith of the assignments. Complainant, beside being then obligated to the Trust Co. as a joint maker and endorser with her husband on one of the renewal notes above mentioned, was also liable as endorser on her husband's $5,000 note held by the Trust Co. and that $5,000 note was paid out of the proceeds of the new $10,000 note. The $10,000 note was renewed from time to time, sometimes for an increased amount and it with the policies of insurance was assigned to defendant. After Wolf's death and receipt by defendant of the policy proceeds of $6,639.33, the defendant applied the entire proceeds on account of the last renewal of the $10,000 note, leaving nothing to apply on account of the note on which defendant subsequently recovered judgment against complainant.
"Complainant's argument that the policy proceeds should have been applied to satisfy the note on which she was liable is based on the contention that as the beneficiary named in the policies, the proceeds thereof belonged to her and that her assignments of the policies were in equity subject to her right, as surety for a debt of her husband, to have the proceeds applied to such debt in preference to her husband's other debts. But the proceeds of the policies were not payable to her at her husband's death. Along with the policies she made absolute assignments of their avails without reservation and it is significant that in the assignments she made no reference to her personal liability to the Trust Co. By the asignments and delivery of the policies she, in effect, consented to substitute the Trust Co. as beneficiary under the policies and she facilitated the pledge of the policies and their proceeds for all of her husband's obligations. ( Bardsley v. First National Bank, c., 111 N.J. Law 512.) Having assigned the policies and their proceeds to the Trust Co. unconditionally, the right thus given the Trust Co. to apply the proceeds as it saw fit in discharge of any of her husband's obligations, passed to defendant as its assignee and should not be limited by complainant's plea that since she was, as between her husband and herself, a surety on one of his obligations, the proceeds of the policies should have been first applied in discharge of that particular debt. ( Irving v. Mutual Trust Co., 82 N.J. Eq. 629; Grover v. Board of Education, 102 N.J. Eq. 415; affirmed, 104 N.J. Eq. 197; Haines v. Equitable Trust Co., 94 N.J. Law 184.)
"Complainant further contends that she executed the assignments of the policies on an express oral agreement made on behalf of the Trust Co. that the proceeds would be first applied to satisfy any obligation of her husband to the Trust Co. on which she was liable, and therefore the defendant should have applied the proceeds in payment of the note on which it recovered judgment against her. It might first be observed that, as heretofore stated, her assignments were absolute on their face and it is not even suggested that when the defendant accepted assignments of the policies from the Trust Co. and paid a consideration therefor, the defendant had notice of any such claim by complainant. However, the same claim or contention was presented by complainant as a defense to defendant's suit on her note. It was specifically set up in the answer she filed in the action at law; she testified in the law suit, as she testified here, that the agreement was made by and with a vice-president of the Trust Co.; that officer testified in the law suit that he had no recollection of such an agreement; the trial judge charged the jury that the duty to prove the agreement to the jury's satisfaction rested on complainant and failing to do so she could not have a verdict. The jury thereafter rendered a verdict against complainant and the question of the existence of such an agreement is res adjudicata and cannot be considered in this action. ( In re Walsh's Estate, 80 N.J. Eq. 565.) But even were the question not res adjudicata I would find on the evidence that complainant has failed to satisfy me that her assignments of the policies, which were absolute and unconditional, were executed on a condition not referred to therein. She could have demanded that the agreement be included in her assignments of the policies, and she could have spoken of it at least on some of the occasions when she placed her signature on the renewal notes, but she never asserted it until after her husband's death.
"The bill of complaint will be dismissed."
Mr. Atwood C. Wolf, for the appellant.
Mr. John Milton, for the respondent.
The decree under review will be affirmed, for the reasons expressed in the opinion by Vice-Chancellor Fielder.
For affirmance — THE CHIEF-JUSTICE, PARKER, CASE, BODINE, DONGES, HEHER, PERSKIE, PORTER, COLIE, DEAR, WELLS, RAFFERTY, HAGUE, THOMPSON, JJ. 14.
For reversal — None.